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Interpreting the Statement of Cash Flows. Tesla Motors manufactures high performance electric vehicles that are extremely slick looking. Exhibit 3.20 presents the statement of cash flows for Tesla Motors for 2010–2012.
REQUIRED
Discuss the relations among net income, cash flows from operations, cash flows from investing activities, and cash flows from financing activities for the firm over the three-year period.
Describe what stage of life cycle these relations suggest for Tesla Motors. Why are negative operating cash flows less than the net losses? Where is Tesla obtaining cash, and what are they doing with it? What do you think will happen with cash flows in 2013?
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Chapter 3 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
- Interpreting the Statement of Cash Flows. Texas Instruments primarily develops and manufactures semiconductors for use in technology-based products for various industries. The manufacturing process is capital-intensive and subject to cyclical swings in the economy. Because of overcapacity in the industry and a cutback on spending for technologyproducts due to a recession, semiconductor prices collapsed in Year 1 and commenced a steadycomeback during Years 2 through 4. Exhibit 3.19 presents a statement of cash flows for Texas Instruments for Year 0 to Year 4. REQUIRED Discuss the relations between net income and cash flows from operations and among cash flows from operating, investing, and financing activities for the firm over the five-year period.arrow_forward“Cash Is King” for all businesses You can determine a company’s cash situation by analyzing the cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) will need to generate cash by issuing new debt or selling its assets. Which of the following is true for the statement of cash flows? It reflects cash generated and used during the reporting period. It reflects revenues when earned. Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the following table, identify which type of activity is described by each statement. Operating Activity Investing Activity Financing Activity Yum Co. uses cash to repurchase 10% of its common stock. A pharmaceutical company buys marketing rights to sell a drug exclusively in East Asian markets.…arrow_forwardAnalyse and comment on the impact of the following events on a companies balance sheet, income statement and cash flow statement. E. g. Company purchases Machinery for $100,000 in cash. Effect. Obvious impact Fixed Asset increased, Balance sheet affected. Company will start recording depreciation expense in Income Statement Cash Outfi ow will reduce balance of cash on balance sheet. Current Ratio likely affected adversely and Working Capital. Analysis. Company may experience increase in Accounts Payable because of such a substantial cash outflow. This will affect Current Liabilities. Or. Company may have to seek short term loan from the bank as a back up in case there is any disturbance in receivables in the future. To counter this substantial cash outflow. Company should have negotiated with a bank a low interest loan to purchase machine over time in instalments. 1)A Manufacturing company ABC: relies on several suppliers for raw materials, often these materials are purchased on 90…arrow_forward
- Accounting data are used to analyze cash flows, and this analysis is critical for decision making. Consider the following case: J&H Corp. recently hired Jeffrey. His immediate mandate was to analyze the company. He has to submit a report on the company's operational efficiency and estimate potential investment in working capital. He has the income statement from last year and the following information from the company's financial reports as well as some industry averages. • Last year, J&H Corp. reported a book value of $400 million in current assets, of which 20% is cash, 22% is short-term investments, and the rest is accounts receivable and inventory. • The company reported $340.0 million of current liabilities including accounts payable and accruals. Interestingly, the company had no notes payable claims last year. There were no changes in the accounts payables during the reporting period. • The company, however, invested heavily in plant and equipment to support its operations. It…arrow_forwardAnticipating increases in future demand, a company invested in purchase of additional inventory, which it plans to use two years later. In their statement of cash flows how would this cash outflow be reported? a. Under investing activities or financing activities. b. Under financing activities. c. Under operating activities. d. Under investing activities. e. Under operating activities or investing activities.arrow_forwardYou can determine a company’s cash situation by analyzing the cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) will need to generate cash by issuing new debt or selling its assets. Which of the following is true for the statement of cash flows? It reflects cash generated and used during the reporting period. It reflects revenues when earned. Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the following table, identify which type of activity is described by each statement. Operating Activity Investing Activity Financing Activity A company reports a 10% increase in its accounts payable from the last month. D and W Co. sells its last season’s inventory to a discount store. Yum Brands distributes dividends to its…arrow_forward
- See the cash flow statement LOADING... (all values in thousands of dollars) (see MyLab Finance for the data in Excel format): a. What were the company's cumulative earnings over these four quarters? What were its cumulative cash flows from operating activities? b. What fraction of the cash from operating activities was used for investment over the four quarters? c. What fraction of the cash from operating activities was used for financing activities over the four quarters? a. What were the company's cumulative earnings over these four quarters? The cumulative earnings were $enter your response here (000). (Round to the nearest integer.) Part 2 What were its cumulative cash flows from operating activities? The cumulative cash flows from the operating activities were $enter your response here (000). (Round to the nearest integer.) b. What fraction of the cash from operating activities was used for investment over the four quarters? The fraction of the cash from operating…arrow_forwardAn advantage of this method is that it highlights how a capital investment can affect a company’s liquidity. Select one: a. Payback Method b. Accounting Rate of Return Method c. Time Value of Money d. Discounted Cash Flow Techniques. Need typed answer only.Please give answer within 45 minutesarrow_forward1. Please calcuate EBITDA (earnings before interest, taxes, depreciation, and amortization) and free cash flow. Free cash flow using cash flow from operations less capital spending. 2. Whether the firm should include the two terms in future financial press releases, financial reports, as well as distribute the terms internally? Statement of Cash Flows Year Ending 12/31/06 Exhibit A (000) 2004 2005 2006 net income $8,246 $11,205 $15,255 depreciation expense 6,129 7,438 9,383 change in accounts receivable (2,402) (6,619) (9,888) change in inventories (1,861) (4,202) (8,225) change in accounts payable 898 1,270…arrow_forward
- “Cash Is King” for all businesses You can determine a company’s cash situation by analyzing the cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) will need to generate cash by issuing new debt or selling its assets. Which of the following is true for the statement of cash flows? It reflects revenues when earned. It reflects cash generated and used during the reporting period. A. Three categories of activities (operating, investing, and financing) generate or use the cash flow in a company. In the following table, identify which type of activity is described by each statement. Operating Activity Investing Activity Financing Activity A company records a loss of $70,000 on the sale of its outdated inventory. D and W Co. sells its last season’s inventory to a discount store. Yum…arrow_forward2012[ $1 2011[S] Operating Cash Accounts Receivable Inventories Land[ Unamortized cost) 435,000 50,000 40,000 100,000 400,000 200,000 800,000 Plant Assets 200,000 Less: Accumulated -100,000 depreciation 1,075,000 1,050,000 25,000 1,050,000 1,050,000 1,075,000 1,050,000 Accounts Payable Share capital The Company paid a dividend of $150,000during 2012and there were no equity contributions or stock repurchases.arrow_forwardPlease give a detailed analysis of the financial statements given below for Joshua & White Technologies. Your analysis should include answers to the questions as follows (not limited to these questions): Has the company’s liquidity position improved or worsened? Has the company’s ability to manage its assets improved or worsened? How has the company’s profitability changed during the last year? Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2019 2018 Cash and cash equivalents $21,000 $20,000 Short-term investments 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84,000 56,000 Total current assets $161,259 $127,240 Net fixed assets 223,097 200,000 Total assets $384,356 $327,240 Liabilities and equity Accounts payable $33,600 $32,000 Accruals 12,600 12,000…arrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
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